Why Homes Take Longer To Sell In The Tallahassee MLS
Yesterday's article Mixed Trends For Real Estate In Tallahassee (regarding conflicting reports from the Tallahassee MLS) generated some good feedback from readers that I believe warrants a continuation article.
The questions and comments all focused on the conclusion regarding the causation of the declining pending home sales in Tallahassee, even as the number of closed home sales in the Tallahassee MLS is rising from the market bottom.
Homes Under Contract In The Tallahassee MLS
Long time reader "DA" has a few ideas about the cause of the decline of new contracts that seems to coexist with the rise in closed home sales in the Tallahassee MLS. DA writes:
Hi Joe - Is it a possibility that homes are staying in "pending" status for shorter period of time due to it being easier to get a loan or easier to process sales for short sales/REOs? So where a home might have been pending for two months in 2012, now its only pending for one month. -DA
First of all, "A+" for effort. Easier lending processes or faster short sale/reo processes would certainly reduce the amount of time a buyer would spend waiting for a closing.
Unfortunately, the opposite is true in this market. The Federal Government has made changes for lenders regarding disclosures and time periods, so the average time it takes to close a loan has increased over the past year.
Additionally, nothing has changed the short sale process, despite all the national buzz about consolidation at the big banks.
Ultimately, if there has been any impact from these two factors, it only has been to lengthen the time a home spends "under contract" in the Tallahassee MLS.
Status Descriptions In The Tallahassee MLS
The real culprit here, I believe, is semantics. Back in the old days in the Tallahassee MLS, the primary status descriptions for homes on the market were as pictured below:
But a new status was created a few years ago in order to keep a home "for sale" while contract contingencies were worked out. The Tallahassee MLS added the "contingent" status in order to transition a property from "for sale" to "pending." Thus there are really two different status' for a property that is under contract. It can be identified as either "contingent" or "pending." Thus, home sellers new timeline for the Tallahassee MLS looks like this:
As you can see, the "contingent" status encroaches on the time that used to be seen as "pending."
For this reason, I believe that we are seeing shorter pending time lengths in the Tallahassee MLS, and more importantly, we are seeing fewer pending transactions. Many real estate agents allow a listing to stay contingent until it closes. This typically occurs due to poor training/understanding or simple oversight (which I have been guilty of ...).
Why This Matters
We use pending home sales from the Tallahassee MLS to forecast future home sales. If we do not consider "contingent" contracts, then the number of "pending" sales will be declining due to this new status.
But if we consider "contingent" contracts is the same light as "pending" to forecast future sales, we will see a higher contract cancellation rate (contingent contracts fail at a higher rate than do pending contracts) and thus our forecasts need to be adjusted.
Either way, NAR and real estate professionals who keep an eye on the market need to account for this not-so-new phenomenon if they want to be accurate in what they report.
And if you want to receive the most accurate, most up-to-date information on what is happening in the Tallahassee MLS, you can subscribe to the FREE Tallahassee Real Estate Newsletter and have them sent to your email inbox when they are published.
*Joe Manausa Real Estate is a brokerage company headquartered in Tallahassee, Florida. Its unique business model provides specialists to both home sellers and home buyers, and the results speak for themselves. JMRE has significantly more 5-star reviews on google than any other local competitor. Joe Manausa Real Estate is a leader in internet marketing and utilizes search engine optimization, email marketing, social media and data analytics to get their clients’ home sold faster and for more money than any other Tallahassee brokerage firm. For more information, visit www.manausa.com or call us at (850) 366-8917.